WASHINGTON - Both sides in the "fiscal cliff" debate stood their ground yesterday as they gathered in Washington for the first time since the elections, with a fundamental tax dispute preventing a broader compromise on deficit reduction.
WASHINGTON — Both sides in the “fiscal cliff” debate stood their ground yesterday as they gathered in Washington for the first time since the elections, with a fundamental tax dispute preventing a broader compromise on deficit reduction.
The White House made it clear that it was ready to negotiate with Republicans on taxes and spending, but a spokesman for President Barack Obama said he will not budge on insisting that the wealthy’s tax rates must rise in 2013.
The president wants to extend the individual income-tax rates for 98 percent of Americans, but he will not agree to extend them for the top 2 percent of earners, White House spokesman Jay Carney said.
Obama is scheduled to hold a news conference today when he will be questioned about fiscal-cliff negotiations.
In addition, White House officials are talking about a schedule in which the president would stay on the campaign trail, with the aim of keeping the pressure on House Republicans to renew the expiring tax cuts for the middle class while letting those for the wealthy expire.
Meanwhile, Treasury Secretary Timothy Geithner warned yesterday against extending the tax breaks to give Washington additional time to broker a deficit-reduction deal, saying it would create more uncertainty in the markets.
“That will leave all the uncertainty you don’t like on the table,” Geithner said at an event sponsored by the Wall Street Journal.
On the Senate floor yesterday, Republican leader Mitch McConnell of Kentucky said his party was open to discussing new government revenues but not raising tax rates. “We’re … not about to further weaken the economy by raising tax rates and hurting jobs,” he said.
The defiant remarks came as Congress returned from a post-election break with seven weeks left to deal with the convergence of tax and spending issues that, if mishandled, could plunge the economy into another recession according to the Congressional Budget Office.
While the big fight is over tax rates, the dispute has held up other consequential tax measures on which there is less disagreement, among them a fix to the alternative minimum tax, which is designed to protect Americans who are not wealthy from being taxed as if they were.
In a new letter to lawmakers yesterday, the U.S. tax commissioner reiterated that more than 60 million taxpayers — half of all individual filers — could be adversely affected by Congress’ failure to resolve these lower-profile issues.
The letter said millions would not even be able to file their returns or receive a refund until late March, while the IRS belatedly adjusts its systems.At the end of 2012, low, “temporary” tax rates enacted a decade ago under former President George W. Bush are set to expire. If Congress does nothing, individual income-tax rates will rise sharply.
In additon, deep, across-the-board cuts in federal programs are scheduled to take effect in January if Congress takes no action.
Obama hosted liberal and labor groups at the White House, and attendees said Obama made his tax-cut stance clear.In a glimpse of one possible compromise, a top Senate Democrat suggested flexibility in raising taxes on the wealthy yesterday.
Senate Finance Committee Chairman Max Baucus agreed that while the rates paid by the richest Americans need to rise to reach a deal, they might not have to go up as far as Obama is insisting, to 39.6 percent.
Corporate chieftains were slated to visit the White House today to talk with Obama. However, the U.S. Chamber of Commerce, the nation’s largest business-lobbying group which backed mostly Republicans in the elections, has not been invited.
Information from the Los Angeles Times was included in this story.